Don’t Be Tardy To The Fed’s Party…

Looks like the Wall Street Journal was tardy to the party, again…

“Home Sales Power Optimism” reads yesterday’s front-page headline.

They’re tardy, I say slightly in jest, due to our one-day-prior discussion on housing. Sure, we’ve talked about housing and other hard asset plays much-prior to this week, but it’s ironic to say the least that the Journal chooses a main headline the day after our “buy a house” chat. There’s plenty more to the story, too…

According to the Journal, “Home prices surged during the first quarter at their fastest pace in nearly seven years, the latest sign of a sustained warm-up in an economic recovery that has otherwise been marked by starts and stops.” (Emphasis added)

Ah, and that’s where the similarities between us and them stop, dear reader. If your humble editor were to be blessed (or cursed?) with a front page article it would likely read a little different.

Something like: “Home prices surged during the first quarter at their fastest pace in nearly seven years…duh. With Bernanke’s concerted effort to prop the housing market it’s no surprise that prices are on the rise. And with the amount of money we’re seeing via bond purchases ($85 per month), along with the long term, low interest rate policy, it’s no wonder prices are heading higher, faster!”

It’s all part of a rigged game.

From a resource investor’s standpoint, playing this rigged game hasn’t been easy in 2013.

The price of gold, our favorite inflation hedge, is down more than 15% on the year. Metal miners have been absolutely crushed by their inability to control costs. For instance, the gold mining ETF (GDX) is down nearly 40% on the year. Many miners, I’m sure, wish it was 2014 already.

As for energy plays, we’ve seen some winners in the U.S. energy patch – mainly the shale and midstream players. One of the high-flyers we keep an eye on here is DCP Midstream (DPM), up 17% on the year.

Big oil, for the most part, keeps chugging along this year – Exxon up 6%, Chevron up 15% and Hess, with its boisterous board members is up a solid 28%. When you get into the weeds, a lot of the smaller players in the energy field are treading water, or sinking.

So in the resource investing space it’s paid to have some skin in the energy game – especially looking at well-run U.S. players or companies that have found themselves in the right place at the shale time.

Here’s the point. Although the last few months have been tough in the resource patch, now’s NOT the time to lose focus on our overall thesis.

After all, the Federal Reserve and other central planners around the globe are just now inking the invitations to their next party. (Heck, the U.S. Fed has been inking party invitations for a while, total fed assets are up 17% year over year.)

You won’t want to miss out on the Fed’s decade-long(?) bender. Don’t be tardy for this party!

The Journal story above misses the mark, but sheds light on the ongoing theme. No matter what you see from the media or hear in the jumbled, big words of Ben Bernanke, don’t be fooled. The writing is on the wall for low interest rates and easing for years if not tens of years to come.

Back in the States, on the same day the housing headline hit the Journal, we saw this from the Associate Press: “Worries that the U.S. Federal Reserve will start to rein in its monetary stimulus program slammed stock markets Wednesday, a day after the Dow Jones index struck another record high.”

What? Us worry?

If there’s one thing I can officially not worry about, it’s the Fed getting its act together. Sure, Bernanke may alter his easing schedule — stop buying bonds here and fiddle somewhere else — but monetary mismanagement won’t come to an end.

A quick look outside the U.S. and you’ll see a host of economies that aren’t limping along even slower than ours. You can rest assure that central planners of those countries — Japan and Europe to be sure — will be more than ready to throw more printed cash on the pile. All the while, they’ll be clamoring for more action from Ben Bernanke. “Please sir, can you print some more?”

The U.S. Fed and their buddies across the globe are dead-set on pulling levers. It’s like sticking a pack of 12-year olds in a room with a whiffle ball set. Whether the room is empty or the room is filled with grandma’s china those boys are going to play.

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